\  THE    EFFECT 


^Restrictive  Legislation 


UPON    THK 


Railways  of  ^^^iseonsin 


Matei\ial  Interests  of  the  State, 


UIS(JU8:^KD  BY 


J.     W.     MIDGLEY 


("IirCAGO : 
CuLVKH,     Pagk,      Hoyxe     &     Co.,     Printers. 


THE    EFFECT 


^Restrictive   Legislation 


UPON   THE 


Rail^vays  of  Wisconsin 


AND    THE 


Matei\ial  Interests  of  the    State, 


DISCUSSED    BY 


J.     W.     MIDGLEY. 


CHICAGO : 

Culver,  Page,  Hoyne  &  Co.,  Printers 

1876. 


>^c^ 


PREFACE. 

To  THE  Public  : 

The  actual  effect  of  the  recent  legislation  in  regard  to  railways  being 
but  indifferently  understood  by  the  community  at  large,  the  under- 
signed requested  Mr.  John  W.  Midgley,  of  Chicago,  who  has  given 
much  study  to  the  question  of  transportation,  to  investigate  the  opera- 
tions of  the  Potter  law  and  kindred  acts,  and  submit  for  publication 
the  result  of  his  observations.  The  following  reply  is  remarkably 
pertinent  to  the  present  state  of  the  controversy,  and  will  throw  much 
light  upon  the  entire  question.  It  is  deserving  of  the  most  careful  con- 
sideration, both  of  those  who  enact  our  laws  and  of  the  people  whose 
interests  are  affected  thereby. 

ALEX.  MITCHELL, 

President  Chicago,  Milwaukee  &  St.  Paul  Ry.  Co. 

ALBERT  KEEP, 
President  Chicago  &  North- Western  Ry.  Co. 

Milwaukee,  January  5,  1876. 


!)89878 


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Discussioisr 


OF    THE    EFFECT   OF 


RESTRICTIVE    RAILWAY    LEGISLATION 


A  candid  view  of  the  relations  sustained  by  the  people  and  the  rail- 
ways discovers  this  cardinal  point  of  agreement :  Whoever  renders 
a  desired  service  is  entitled  to  just  compensation.  It  is  a  natural  right, 
an  inviolate  truth.     "  The  laborer  is  worthy  of  his  hire." 

This  principle  being  established,  it  becomes  necessary  to  consider 

WHAT    IS    A    REASONABLE    RATE. 

Were  it  agreed  upon,  this  controversy  would  cease.  But  men  differ, 
hence  adjudications  are  required.  The  Legislature  may  declare  that 
the  rates  shall  be  reasonable :  whether  they  are  or  not,  is  a  matter  for 
the  courts  to  decide. 

Such  question  is  new  to  our  tribunals.  Familiar  though  complaints 
of  extortion  have  become,  no  issue  has  been  made  to  determine 
the  measure  of  reasonableness.  One  case,  however,  is  reported,  where- 
in the  court  said  :  "  It  is  agreed  by  all  the  books  that,  while  the  carrier 
enjoys  the  privilege  of  a  common  carrier,  it  is  a  duty  he  cannot  escape 
in  any  form  to  receive  goods,  if  he  has  room  to  carry  them,  for  a  rea- 
sonable reward  ;  and  the  reasonable  reward  may  he  set  down  as  the 
accustomed  reward  for  like  services. ''"^ 

Kent  also  defines  it  to  be  a  "  reasonable  or  customary  price,  "f 

This  corresponds  with  the  English  rule,  which  is  stated  thus  :  "  It 
is  to  be  supposed  that  a  common  carrier  can  afford  to  carry  at  much 
the  same  rate  of  hire  as  that  which  is  exacted  universally  hy  carriers 
similarly  situated,  and  which,  if  it  has  been  found  to  remunerate  them, 
may,  upon  the  best  grounds,  be  called  reasonable.     The  word  reason- 


*  Cole  V.  Goodwin,  19  Wendell  [N.  Y.],  261.  t  2  Kent's  Commentaries,  599. 


able,  therefore,  is  to  be  the  criterion  of  the  price  which  a  common  car- 
rier has  a  right  to  demand."* 

Nor  will  this  construction  be  denied.  It  conforms  to  the  judgment 
of  reasonable  men.  Therefore  it  is  claimed  there  is  no  disposition  in 
Wisconsin  to  deny  the  railway  companies  just  compensation  for  their 
services.  This  profession  has  been  repeatedly  made.  It  was  an- 
noji'Rced  in  the  appellate  court,  has  been  echoed  through  the  press  and 
On' the  platform^.  Speaking  for  the  people,  their  representatives  said: 
"  Show  us  that  the  rates  fixed  by  law  are  not  reasonable  and  we  will 
make  them  just." 

Relying  upon  that  assurance,  and  inviting  attention  to  the  method, 
I  purpose  to  demonstrate  the  unreasonableness  of  the  rates  now  im- 
posed on  Wisconsin  railways  and  establish  their  claim  to  immediate 
relief. 

The  rule,  as  already  stated,  has  been  prescribed.  Taking  the 
standard  given,  a  difficulty  arises  in  the  varying  circumstances  of 
roads.  No  two  are  alike.  Still,  many  are  sufficiently  so  to  admit  of 
tolerably  fair  comparison.  The  oft-recurring  phrase  "  like  circum- 
stances" has  been  authoritatively  construed.  It  is  decided  that  "  things 
are  conveyed  under  '  like  circumstances  '  where  the  labor  and  expense 
are,  in  the  opinion  of  the  jury,  the  same."t 

AN    IMPORTANT    CONSIDERATION. 

The  need  of  an  undertaking  being  admitted,  the  next  consideration 
is,  its  cost.  In  the  matter  of  transportation,  this  consideration  is  para- 
mount. If  compelled  to  do  business  below  cost,  bankruptcy  is  merely 
a  question  of  time.  A  knowledge  of  the  cost  is,  therefore,  absolutely 
NECESSARY  in  order  to  fix  reasonable  rates.  A  tariff  that  would  be 
extortionate,  if  charged  upon  the  New  York  Central,  might  be  no 
more  than  reasonable  on  the  Colorado  Central,  where  business  is  light 
and  expenses  are  heavy.  Granting  this,  were  it  shown  that,  in  a  region 
where  construction  cost  largely  and  expenses  are  heavy,  while  traffic  is 
light,  the  rates  imposed  are  lower  than  the  average  of  those  found  in 
any  other  State,  would  it  not  be  manifest  that  injustice  is  being  done  ? 

It  is  not  presumed  that  an  accurate  computation  of  the  cost  of  moving 
a  ton  of  freight  one  mile  can  be  made  ;  nor  that,  if  approximated,  it 
would  be  reliable ;  for,  as  observed  by  the  Massachusetts  Commission- 


*  Browne  on  the, Law  of  Carriers,  p.  82. 

t  Great  Western  Railway  Company  v.  Sutton,  H.  of  Lords,  38  L.  J.,  Exch.,  184. 


ers,  "  the  cost  of  moving  freight  varies,  under  given  circumstances,  at 
least  as  much  as  the  cost  of  raising  crops."* 

In  like  manner,  a  committee  of  New  England  Railway  Superintend- 
ents reported  that  "  there  were  no  reliable  data  on  which  the  exact 
cost  of  transporting  a  ton  of  freight  one  mile  could  be  based,  "f  Nor 
will  the  precise  cost  be  known  until  a  railroad  is  built  and  operated 
exclusively  for  freight. 

ELEMENTS    OF    COST. 

But  there  are  certain  elements  of  cost  contingent  upon  locality  that 
are  quite  evident.  When  it  is  shown  that,  upon  the  lines  operated 
by  the  Chicago  &  North-Western  and  Milwaukee  &  St.  Paul  Com- 
panies, an  annual  outlay  of  nearly  two  million  dollars  is  required  for 
fuel  for  locomotives,  and  that  medium  coal  averages  $4  per  ton  in  Wis- 
consin, while  the  Pennsylvania  RailroadJ  pay  only  $2  for  the  best  qual- 
ity, it  is  manifest  that,  in  one  important  respect,  the  cost  of  transpor- 
tation must  be  one  hundred  per  cent,  higher  in  Wisconsin  than  in 
Pennsylvania.  This  comparison  extends  to  Illinois,  Indiana  and  Ohio 
roads  that  traverse  coal  districts,  some  of  which  average  $1.40  §  per 
ton.  Perhaps  it  becomes  still  more  apparent  in  view  of  the  fact  that 
of  the  sixty  odd  per  cent,  which  the  operating  expenses  of  the  North- 
Western  and  St.  Paul  railways  bear  to  their  earnings,  the  item  of 
fuel  constitutes  twelve  per  cent. 

In  the  same  connection,  expenditures  for  track  repairs  and  renewals 
should  be  considered.  Thei/  are  the  leading  items  of  expense.  Sup- 
plies are  largely  drawn  from  the  East.  Western  roads  must,  therefore, 
pay  in  excess  of  Eastern  roads  the  cost  of  carriage  to  the  West.  To 
that  extent,  therefore,  their  current  expenses  are  larger. 

Another  element  of  increased  cost  is  climatic.  The  Vice  President 
of  the  Chesapeake  &  Ohio  Railroad  told  Senator  Windom's  committee  || 
that  they  never  had  to  stop  their  trains  on  account  of  snow,  and  it  was 
very  rarely  that  a  rail  broke  on  their  road.  How  different  the  experience 
of  Wisconsin  railroads  !  During  a  "  severe  spell  "  they  are  blocked  for 
d.iys,  traffic  is  suspended,  and  great  losses  are  incurred.  Steel  tires 
fresh  from  the  works  and  rails  newly  laid  break  like  glass,  which 
disasters  no  human  foresight  or  ingenuity  can  prevent. 

*  Third  Ann.  Report  R.  R.  Comrs.,  p.  167. 

t  Sixth  Ann.  Report  R  R.  Comrs.,  Mass.,  p.  7!). 

X  Testimony  of  A.  J.  Cassatt,  Transpn.  Routes  to  Seaboanl,Vol.  II,  p.  51. 

g  Testimony  of  John  Newell,  Transpn.  Routes  to  Seaboard,  Vol.  II,  p.  85. 

I  Transpn.  Routes  to  Seaboard,  Vol.  II,  p.  439. 


As  it  does  not  appear  that  in  any  of  the  remaining  items  of  ex- 
pense the  Wisconsin  companies  can  effect  a  reduction  compared  with 
other  roads,  it  is  clear  that  the  cost  of  railroad  operations  in  that  State 
largely  exceeds  that  of  roads  more  fortunately  located. 


INCOMPARABLY    LOW    RATES. 

On  what  principle,  then  (conceding  the  power),  should  they  be  re- 
stricted to  lower  rates  of  fare  and  freight  ?  That  they  are  can  be 
plainly  shown.  In  order  to  anticipate  any  question  that  may  arise  as 
to  the  accuracy  of  the  statements  and  comparisons  made,  the  sources 
whence  they  are  obtained  are  carefully  noted. 

The  average  rate  on  the  several  classes  named  in  the  present  law  is, 
for  150  miles,  2y|-Q-  cents  per  ton  per  mile.  The  rate  for  150  miles  is 
taken  because  that  is  the  average  distance  that  each  ton  of  freight  is 
hauled  upon  the  leading  railways  of  the  State.  But  the  showing  is  more 
favorable  to  Wisconsin  than  the  distribution  of  traffic  justifies.  The 
average  stated  would  be  realized  were  an  equal  quantity  of  each  class 
of  freight  carried.  Such,  however,  is  not  the  case.  The  lower 
classes  predominate.  Lumber  is  the  main  article  of  shipment.  For 
150  miles  it  is  taken  at  li^  cents  per  ton  per  mile,  and  for  250  miles 
at  less  than  IJ  cents  per  ton  per  mile.  This  being  the  traffic  upon 
which  the  companies  mainly  rely,  it  is  evident  they  are  compelled  to  do 
the  major  portion  of  their  local  business  at  less  than  one  cent  and  a 
half  per  ton  per  mile  ! 

No  local  rates  so  low  and  unreasonable  prevail  in  any  other  State  or 
country. 

The  railroads  of  Connecticut*  average,  on  all  freight,  6J  cents  per 
ton  per  mile ;  Maine,t  4J  cents  ;  Massachusetts, J  4J  cents ;  seven 
Pennsylvania!  roads,  5  cents  ;  twenty-three  Ohio||  railroads,  6|  cents, 
and  the  railroads  of  New  York,*|[  including  the  New  York  Central,  3J 
cents  per  ton  per  mile. 

Turning  to  Europe,**  the  average  rates  per  ton  per  mile  are,  in 
Belgium  (where  transportation  is  notoriously  cheap),  2J  cents  ;  in 
France,  3  cents  ;  in  England,  3}  cents,  and  in  Germany,  4  cents. 


*  Rep.  R.  R.  Conirs.  Conn.,  1875.  P  Ohio  Railway  Rep.,  1874. 

t  Rep.  R.  R.  Comrs.  Maine,  1874.  %  State  Engineer's  Rep.,  1874. 

+  Rep.  R.  R.  Comrs.  Mass.,  1875,  **  Royal  Commission  on  Rys.,  pp.  71  and  72 

g  Auditor  Gen'l's  Report,  Penn.,  1874. 


HOW  THE  POTTER  LAW  OPERATES. 

Startling  as  these  contrasts  may  seem,  the  fifth  section  of  the 
Potter  law  makes  them  yet  more  striking.  It  treats  the  several  roads 
as  though  they  constituted  one  line.  Consequently,  the  road  on  which 
the  shipment  originates  has  the  heavy  end  of  the  rate.  Lumber  comes 
from  northern  lines  on  to  the  St.  Paul  and  North-Western  roads.  The 
result  may  be  stated  thus:  A  car  load  of  lumber  is  shipped  at  Junc- 
tion City,  destined  to  Madison.  The  distance  is  152  miles — 53  on  the 
Wisconsin  Valley,  25  on  the  West  Wisconsin,  and  74  on  the  North- 
Western  Railway. 

Junction  0ity,O 


O  Wis.  Val.  Junc. 


Elboy. 


O  Madison. 

The  car  load  rate  for  the  distance  is  $23.     If  divided  among  the 
three  roads  in  the  order  named  in  section  four  of  the  law,  the 

Wisconsin  Valley  would  receive  for  hauling  it  53  miles,  $14.50 
West  Wisconsin         "         "         "         "  25     "  2.50 

Chicago  &  North-Western  ''         "         "  74     "  6.00 

Were  this  rate  divided  on  a  strictly  pro  rata  basis — i.  e.,  in  propor- 
tion to  the  distance  hauled  on  each  line — the 

Wisconsin  Valley  Railroad  would  receive  -       -       -        $  8.00 
West  Wisconsin  "  "         '<>  .       .       .         3.80 

Chicago  &  North-Western        "         "       .       .       -       .  11.20 


The  results  would  be  still  different  were  these  roads  allowed  the 
local  rates  named  in  the  Potter  law.     Then  the 

Wisconsin  Valley  Railroad  would  receive    -       -       -       $14.50 
West  Wisconsin  "  u  c.  ...       8.00 

Chicago  &  North- Western         ''         ''         ...         16.00 

Obviously,  the  law  abounds  in  inconsistencies.  Dealers  at  Wisconsin 
Valley  Junction  would  be  charged  $14.50  for  a  car  load  of  lumber 
from  Junction  City,  whereas,  if  the  car  were  destined  beyond,  the 
total  rate  as  f;ir  as  Elroy — twenty-five  miles  further — would  not  reach 
$12.00.  Why  such  discrimination  against  local  sliippers?  Could 
there  be  anything  more  unjust  ?  In  one  case  the  Wisconsin  Valley 
Railroad  would  receive  $14.50  for  hauling  a  car  fifty-three  miles  ;  in 
the  other — for  the  same  service — the  rond  would  get  only  $8.00.  In 
either  event,  the  West  Wisconsin,  for  hauling  this  car  from  the  Junc- 
tion to  Elroy,  Avould  not  receive  half  the  sum  allowed  the  former  road ; 
while,  if  the  Wisconsin  A^ alley  claimed  the  full  amount  prescribed  by 
law — $14.50 — the  West  Wisconsin  would  receive  only  $2.50  for  the 
same  service  which,  if  the  shipment  began  at  the  Junction  and  termi- 
nated at  Elroy,  would  give  the  road  $8.00.  Such  inequalities,  if  per- 
petrated by  a  railway  company,  would  not  be  tolerated. 

Compared  with  other  States,  the  lumber  rate  is  unreasonably  low. 
For  150  miles  the  car  load  rate  is  barely  one  cent  and  a  half 
per  ton  per  mile.  In  New  England,  where  population  is  dense  an<l  traffic 
large,  the  published  rate  of  the  Vermont  Central  for  lumber,  200  miles, 
is  3  cents  per  ton  per  mile,  and  the  Boston  &  Albany,  3J  cents  per  ton 
per  mile  ;  while  in  the  West,  where  lumber  is  largely  consumed,  on 
leading  Indiana,  Illinois  and  Missouri  roads,  the  average  rate  for  150 
miles  exceeds  3  cents  per  ton  per  mile.  In  other  communities,  there- 
fore, under  better  conditions,  the  accustomed  rates  for  lumber  are  100 
per  cent,  higher  than  the  maxinmm  rates  "allowed  by  law  in  this  State. 

This  adverse  comparison  extends  to  grain  and  flour.  While  the 
rates  current  throughout  the  West  average  3J  cents  for  150  miles, 
Wisconsin  roads  are  limited  to  2^  cents  per  ton  per  mile. 

THE    COMPARISON    OF    PASSENGER    RATES 

is  not  any  more  favorable.      The  railroads  of  Connecticut*  average  4J 
cents  per  mile;  in  Mainef  they  vary  from  4  cents  to  5  cents;  fourteen 


*  Rep.  R.  R.  Comi-8.  (^oiiu.,  1875.  f  li*"P-  K-  K-  Comrs.  Maine,  1874. 


Pennsylvania*  roads  average  8 J  cents;  Michiganf  averages  8 J  cents  ; 
Illinois,  4  cents;  Minnesota,  4  to  5  cents;  while  in  the  Upper  Pen 
insula  the  rate  is  5  cents,  and  in  Colorado  10  cents  per  mile. 

In  Europe,  passenger  rates  are  invariably  higher.  Throughout 
England,  they  average  4  cents  per  mile  ;  |  while  upon  the  best  traveled 
routes  § — as  from  London  to  Brighton  and  London  to  Dover — the 
throiufli  rate  exceeds  5  cents  and  6  cents  per  mile. 

On  the  Continent,  rates  average :  in  France,  4  J  to  5  cents,  and  in 
Austria,  4  cents. 

Could  it  be  shown  that,  at  the  rates  now  imposed,  the  Wisconsin 
railways  were  enabled  to  earn  fair  returns,  some  justification  for  their 
continuance  might  be  claimed.  But  the  depressing  fact  is,  that  no 
railroad  in  the  State  is  in  position  to  earn  a  dividend  ;  while  two  only 
from  their  earnings  meet  current  expenses  and  the  interest  on  their 
indebtedness.  Nor  would  they  be  in  this  exceptional  position  were  it 
not  for  their  operations  in  other  States.  This  being  the  case,  were  it 
brought  to  the  notice  of  the  people  of  Wisconsin,  it  is  believed  they 
would  not  continue  to  accept 

CHEAP  TRANSPORTATION  AT  THE  EXPENSE  OF  OTHERS. 

Such,  however,  is  the  result.  Apply  the  average  Potter  law  rates 
to  the  business  of  either  company  for  their  last  fiscal  years,  and  the 
fact  becomes  apparent.  That  average  is  shown  not  to  exceed  \\  cents 
or  1|  cents  per  ton  per  mile.  Take  the  latter  rate  and  apply  it  to  the 
total  number  of  tons  moved  one  mile  over  the  whole  road  of  the 
Chicago  &  North-Western  Railway  for  the  last  fiscal  year — i54,546,- 
408  tons— and  it  would  yield  $7,954,563.10,  which  is  $1,594,- 
866.70  less  than  the  company  did  earn  on  account  of  the  higher 
rates  received  in  other  States.  After  paying  operating  expenses 
and  interest  on  bonds,  but  no  dividends,  the  company  had  a  surplus  of 
$518,266.38.  Deduct  this  amount  from  the  deficiency  above  stated, 
and  it  is  seen  that,  had  the  Potter  law  rates  been  applied  to  the 
entire  business,  the  company  would  have  closed  the  year  Avith  a  deficit 
of  $1,076,600.32  ! 

A  like  result  would  have  attended  the  Milwaukee  &  St.  Paul  Com- 
pany had  the  average  Potter  law  rates  been  applied  to  their  business 
for  the  same  year.  Their  entire  movement  of  freight  was  259,168,248 
tons  one  mile,  which,  at  If  cents  per  ton,  would  yield  $1,601,707.50 

*  Auditor  Gen'1'8  Rop.,  1874.  %  London  Ry.  News,  Feb.  6,  '75,  p.  187. 

t  Rep.  R.  R.  Comr.  Mich.,  1875.  g  Transpu.  Routes  to  Seaboard,  Vol.  I,  p.  222. 


8  - 

less  than  the  better  rates  obtained  did  produce.  As  the  company,  after 
paying  operating  expenses,  interest  on  bonds,  etc.,  had  a  net  income 
of  $119,107.87,  it  is  evident  that,  had  they  been  reduced  wholly  to 
Potter  law  rates,  they  would  have  had  a  deficiency  of  $1,482,599.63 
as  the  result  of  one  year's  operations  ! 

Nor  does  it  appear  that  the  companies  with  whose  rates  comparisons 
have  been  made  are  excessively  remunerative.  Massachusetts — where 
the  highest  rates  of  freight  prevail — and  Pennsylvania  fall  below  five 
per  cent.  ;  Maine  and  Connecticut  average  3J  each ;  while  in  the 
West,  Ohio  does  not  reach  3  per  cent.,  and  only  two  roads  in  Indiana, 
four  in  Illinois,  and  four  (leased)  in  Iowa  pay  any  dividends  whatever. 
Of  the  remainder,  the  majority  are  in  the  hands  of  receivers,  directed 
by  the  Federal  Courts. 

To  the  reflective  mind  the  situation  is  suggestive.  In  compliance 
with  popular  demand,  a  crushing  blow  has  been  struck.  Beneath  it  a 
mighty  industry  lies  prostrate.  Provocation  there  may  have  been, 
complaints  there  doubtless  were,  yet'  they  arose  mainly  from  miscon- 
ception. So  rapidly  had  railroads  grown,  so  far-reaching  were  their 
influence,  and  so  little  understood  their  operations,  that  apparent  in- 
equalities were  magnified  into  grievous  wrongs. 

DISCRIMINATIONS 

were  made,  but  not  all  of  them  were  unjust.  Had  the  distinction 
been  drawn,  much  trouble  might  have  been  avoided. 

It  is  not  strange  that  people  wondered  why  freight  should  be  carried 
past  their  doors  cheaper  than  theirs  Avas  taken  a  less  distance.  Ship- 
pers at  Eau  Claire,  for  instance,  saw  no  reason  why  they  should  pay 
as  much  to  Chicago  or  Milwaukee  .as  did  the  citizen  of  St.  Paul. 
They  did  not  consider  that  the  Mississippi  formed  a  natural  highway 
between  St.  Louis  and  St.  Paul,  over  which  steamboats  and  barges 
plied  freely,  else  would  they  have  known  that  the  railways  from  Chicago 
and  Milwaukee  must  carry  freight  to  St.  Paul  as  cheaply  as  the  boats 
would  from  St.  Louis,  or  lose  the  business.  Nor  would  the  mere  fact 
of  St.  Paul  receiving  lower  rates  necessarily  work  injustice  to  Eau 
Claire.  It  was  an  advantage  the  former  had  before  the  railway  was 
built.  Then,  freight  was  carried  to  the  nearest  accessible  point,  and 
carted  thence  to  Eau  Claire.  Had  the  railway  from  St.  Paul  termi- 
nated at  Eau  Claire,  no  complaint  would  have  been  made.  Willingly 
would  the  citizens  have  paid  the  additional  rate  from  St.  Paul,  because 


9 

they  derived  the  benefit  of  the  difference  between  the  cost  of  having 
their  freight  carried  by  rail  or  teaming  it  from  the  river.  But  the 
road  was  extended  through  to  the  lake,  whereupon  the  intermediate 
shippers  demand  that  they  be  given  advantages  over  those  who  al- 
ways had  an  outlet ;  that  is,  the  companies  having  spent  millions  of 
dollars  in  providing  the  interior  places  with  a  highway  out  of  the 
wilderness,  must  also  give  them  preference  over  those  which  the 
Almighty  preferred  when  He  established  the  water  courses. 

A    POPULAR    ERROR. 

Moreover,  the  complaint  is  based  on  the  mistaken  belief  that  it 
always  costs  less  to  carry  freight  a  short  than  a  longer  distance.  This 
fallacy  has  repeatedly  been  exposed.  "Distance,"  says  the  Massa- 
chusetts Commissioners,  "  has  little  to  do  with  the  cost  of  carriage ;" 
and  they  add,  "  so  obvious  is  this  fact  that  corporations  earn  large  net 
profits  on  their  long  business  at  one-third  or  one-quarter  of  that  rate 
per  mile  which  is  barely  remunerative  on  short  business.  The  simple 
and  obvious  fact  that  wheels  earn  money  only  when  they  are  in  motion, 
and  that  they  earn  it  as  long  as  they  are  in  motion,  has  constantly 
■-been  disregarded  by  those  seeking  to  frame  laws  regulating  fares  and 
freight."*  The  expense  of  loading  and  handling  is  the  same,  whether 
the  freight  be  destined  ten  or  one  hundred  miles.  But  the  cost  of 
moving  local  freight  is  greater  than  that  of  through  freight.  When  a 
train  of  the  latter  is  made  up,  it  is  sent  through  to  its  destination  as 
rapidly  as  possible.  It  requires  no  way  stations,  and  should  not  be 
charged  with  maintaining  them.  They  are  needed  solely  for  local 
freight,  which  is  delayed  at  every  station  where  a  car  has  to  be  taken 
on  or  oiF.  Therefore  it  is  that  a  local  freight  train  timed  to  run  one 
hundred  miles  in  a  day  accomplishes  less  work  than  a  through  freight 
train  that  runs  three  hundred  miles  in  the  same  time. 

This  question  has  frequently  come  to  the  notice  of  the  New  York 
Assembly.  One  complaint  was  that  of  a  man  who  shipped  three  car 
loads  of  cattle  from  a  station  some  twenty  miles  east  of  Buffalo,  and 
was  charged  the  rate  from  Buflfalo.  At  that  city  the  company  had 
cattle  yards,  men  to  assist  in  loading,  and  the  appliances  for  doing 
the  business  promptly  ;  whereas,  at  the  way-station  there  were  no  facili- 
ties. The  cars  had  to  be  hauled  there  empty,  and  the  whole  train 
iield  while  three  cars  were  being  loaded ;  or,  the  cars  were  left  on  side- 

*  B.  B  Commr's'  Bep.  [Mass.,  1873,]  p.  56. 


10 

track  to  be  loaded  and  taken  on  by  a  subsequent  train.  Clearly,  it 
would  have  been  cheaper  to  the  company  to  have  taken  the  freight  at 
Buftklo. 

Suppose  a  shipment  were  offered  at  a  point  where  there  is  no  sta- 
tion ;  would  it  not  be  cheaper  to  the  company  to  take  it  at  a  station, 
even  though  it  necessitated  ten  or  twelve  miles'  greater  haul  ?  And 
what  is  true  in  such  case  is  alike  true  between  leading  stations,  where 
facilities  for  large  business  exist,  and  intermediate  stations,  where 
traffic  is  light  and  conveniences  are  few. 

JUST    OK    UNJUST. 

The  question  as  to  whether  charges  are  unjust  depends  not  upon 
what  price  the  company  carries  for  others,  but  upon  whether  the 
charges  in  themselves  are  excessive  or  not. 

This  accords  with  the  view  taken  by  the  Supreme  Court  of  Missouri 
at  their  term  last  November.  The  right  to  alter  or  repeal  any  charter 
is  reserved  by  the  Constitution  of  that  State.  In  1872  an  act  was 
passed  to  prohibit  unjust  discrimination.  Of  this  act,  the  Court  say 
it  "undertakes  to  define  the  obligations  of  railroad  companies,  and  to 
declare  that  a  charge  for  one  distance,  if  it  exceeds  a  charge  for  a 
longer  one,  is  an  unjust  discrimination.  It  may  be  so,  but  whether  it 
is  or  not  is  a  question  for  the  courts  to  decide,  and  not  for  the  Legis- 
lature."* 

So,  also,  the  Supreme  Court  of  Maine  say :  "  The  common  and 
equal  right  is  to  reasonable  transportation  services  for  a  i-easonable 
compensation.  Neither  the  service  nor  the  price  is  necessarily  un- 
reasonable because  it  is  unequal  in  a  certain  narrow,  strict  and  literal 
sense."t 

In  the  outcry,  one  important  consideration  was  ignored.  When,  for 
instance,  Sparta  complained  of  being  charged  as  much  to  Milwaukee  as 
was  LaCrosse,  no  account  was  taken  of  the  fact  that  it  was  because  the 
line  ran  through  to  LaCrosse  that  Sparta  obtained  so  low  a  rate  as  she 
did ;  for,  had  the  road  stopped  at  Sparta,  and  been  without  through 
business,  the  local  traffic  would  have  had  to  pay  the  entire  expenses  of 
the  road.  In  proportion  as  a  road  is  permitted  to  compete  for  through 
business,  to  that  extent  \t  is  enabled  the  cheaper  to  do  its  local  business. 


*  Sloan  &  Co.  v.  The  Pacific  R.  R.  Co.  [not  reported], 
f  McDuffoe  V.  Railroad,  52  Maiue,  451. 


11 

VARYING   COST   OF    RAILWAY   OPERATIONS. 

As  the  cost  is  not  uniform  upon  any  one  line,  it  follows  that  upon 
different  roads  there  must  be  great  variation.  Yet  the  present  law  im- 
poses the  same  rates  per  mile  upon  all  the  roads  operated  by  each 
company.  It  Avill  not  be  affirmed  that  the  cost  of  operation  is  the 
same  upon  each  one  or  upon  any  two  of  these  lines.  For  the  year 
ending  December  31,  1874,  the  expenses  per  mile  run  varied,  on  the 
Milwaukee  &  St.  Paul  Railway,  from  $1.17  on  the  LaCrosse  Division 
to  $1.42  on  the  Prairie  du  Chien  and  $1.46  on  the  Northern  Divisions. 

Similar  diiferences  prevail  in  other  States.  During  1874  the  ave- 
rage cost  of  transporting  a  ton  of  freight  one  mile  in  New  York  varied 
from  nine  mills  on  the  Erie  and  the  New  York  Central  to  ten  cents  on 
the  New  York,  Boston  &  Montreal  Railroad;  and,  in  the  last  report  of 
the  Louisville  &  Nashville  Railroad,  it  is  shown  that  the  average  cost 
of  moving  one  ton  of  freight  one  mile  varied  from  one  and  a  quarter 
cents  on  the  main  line  to  over  eight  cents  on  their  Glasgow  branch. 
Like  results  are  observed  in  Pennsylvania.  According  to  President 
Scott's  last  report,  the  average  cost  of  transporting  a  ton  of  freight  one 
mile  varies  from  seven  mills  on  the  Pennsylvania  road  to  one  cent  and 
seven  mills  on  their  New  Jersey  lines.  To  enforce  a  uniform  tariff 
where  the  cost  of  operating  is  so  varying  is  clearly  unjust. 

A   JUSTIFIARLE    DIFFERENCE. 

The  equity  of  charging  a  higher  rate  of  freight  where  the  current 
expenses  are  much  greater  cannot  be  denied.  Precisely  such  differ- 
ence was  made  in  Wisconsin  two  years  ago.  Reason  sufficient  existed, 
yet  the  act  was  bitterly  denounced  and  made  the  pretext  for  the  pass- 
age of  the  Potter  law.  The  North-Western  Company  had  completed 
their  line  from  Madison  north  to  a  junction  with  the  Minnesota  system. 
In  doing  so' they  had  surmounted  stupendous  obstacles.  Three  tunnels 
were  built  in  one  county.  So  rugged  was  the  country  and  so  heavy 
the  work,  that  more  money  was  expended  upon  the  line  than  in  the 
construction  of  any  other  between  the  lakes  and  the  Missouri.  Its 
grades  are  such  that,  with  double  power,  less  than  one-half  the  load 
can  be  hauled  that  a  single  locomotive  will  carry  over  an  ordinary 
road.  Thus  the  cost  per  mile  is  four  times  that  on  a  level  road.  Ex- 
penses being  so  much  greater,  and  local  business  small,  a  slight  increase 
over  the  rates  charged  on  the  Company's  other  Wisconsin  lines  was 
made.     The  result  is  well  known.     The  event  has  passed  into  history, 


1^ 

and  the  candid  inquirer  must  determine  whether  it  was  more  just  to 
ask  higher  compensation  when  the  service  cost  largely  and  traffic  was 
small,  or  to  impose  incomparably  low  rates  regardless  of  cost. 

For  this  action  excuse  could  not  be  made  that  the  railway  companies 
would  not  reduce  rates  unless  obliged  to  do  so  by  law.  The  tendency 
had  been  constantly  downward.  On  the  Milwaukee  &  St.  Paul  Rail- 
way the  average  price  per  ton  per  mile  had  decreased  from  4y^  cents 
in  1865  to  2y%V  cents  in  1874,  and  on  the  Chicago  k  North- Western 
from  three  and  a  half  cents  in  1868  to  two  and  a  half  cents  in  1873. 

The  effect  of  grades  upon  the  cost  of  movement  must  be  self-evident. 
Every  teamster  knows  the  difference  between  drawing  a  heavily  loaded 
wagon  on  a  smooth,  level  road,  and  hauling  it  over  a  hill.  The  differ- 
ence upon  railroads  has  been  ascertained  by  actual  tests.  For  every 
grade  of  twenty  feet  to  the  mile,  the  work  required  to  overcome  it  is 
equivalent  to  that  expended  upon  two  miles  of  level  road.  Justly,  then, 
the  character  of  a  road  should  be  considered  in  establishing  its  tariff  of 
rates. 

AMOUNT    OF    BUSINESS    AFFECTS    COST. 

To  determine  the  cost  at  which  freight  can  be  taken,  it  is  essential 
to  know  the  probable  amount  to  be  carried.  A  large,  regular  business 
can  be  done  cheaper  than  a  small,  occasional  business.  This  fact  a 
freight  manager  thus  illustrates  :  "I  had  occasion  to  investigate  two 
roads  and  to  compare  them.  One  did  a  business  of  some  four  hundred 
millions  of  tons  one  mile  in  a  year ;  the  other  about  fifteen  millions. 
The  difference  was  very  great.  The  cost  per  ton  per  mile  on  the  road 
that  did  the  large  business  was  about  one  cent ;  on  the  road  that  did 
the  small  business,  it  was  about  5  -^-^  cents.  The  large  amount  of  fixed 
expenses  and  the  small  amount  of  tonnage  moved  caused  the  differ- 
ence." *     .  *  / 

Suppose  a  road  carries  one  hundred  millions  of  tons  one  mile  in  a 
year,  at  a  profit  of  half  a  cent  per  ton  per  mile,  and  another  road  car- 
ries one  million  tons  at  one  cent  per  ton  profit,  the  one  doing  the  large 
business  will,  at  half  the  rate  of  profit,  make  five  times  the  money  the 
other  does.  What  justice  would  there  be  in  compelling  the  latter  to 
carry  its  one  million  tons  at  the  same  or  a  less  rate  than  the  former 
receives  for  carrying  one  hundred  millions?  Precisely  such  rule 
is  enforced  in  this  State.     Last  year,  the  Pennsylvania  and  the  New 


*  Transportation  Routes  to  Seaboard,  Vol.  II,  p.  32. 


13 

York  Central  Railroads  each  carried  over  thirteen  hundred  million 
tons  of  freight  one  mile  against  two  hundred  and  fifty-nine  millions  car- 
ried by  the  Milwaukee  &  St.  Paul  and  four  hundred  and  fifty-four 
millions  five  hundred  thousand  by  the  North-Western  ;  yet  the  Wiscon- 
sin companies,  although  their  expenses  are  greater,  were  compelled  to 
carry  their  small  tonnage  at  lower  local  rates  than  the  Pennsylvania, 
over  which  one  hundred  and  twenty  trains  frequently  pass  daily,*  and 
the  New  York  Central,  which  has  sixteen  miles  of  freight  trains 
daily  If 

It  is  the  transportation  of  such  enormous  quantities  of  freight  that 
enables  the  Pennsylvania,  New  York  Central  and  Boston  &  Albany 
Railroads  to  average  each  over  $40,000  gross  earnings  per  mile,  and  to 
earn  greater  net  earnings  per  mile  than  are  the  gross  earnings  of  any 
two  Wisconsin  lines ! 

FREIGHT    MOVEMENT    LARGELY    IN    ONE    DIRECTION. 

The  distribution  of  traflSc  in  this  State  renders  a  fixed  tariff  especially 
burdensome.  The  movement  of  freight  is  largely  in  one  direction. 
Timber  is  cut  in  the  northern  and  consumed  in  the  southern  counties. 
Grain  is  carried  eastward.  The  cars  required  for  the  service  are  usu- 
ally sent  out  empty.  Therefore,  when  a  car  load  of  lumber  is  offered, 
say  at  Tomah,  or  a  cargo  of  wheat  at  Monroe,  empty  cars  have  to  be 
sent  there ;  thus  making  a  double  trip  necessary  to  secure  freight  for 
one  trip. 

During  the  year  1874,  the  Milwaukee  &  St.  Paul  Railway  hauled 
1,251,234  tons  eastward  and  only  484,321  tons  westward.  The  cars 
requisite  to  carry  this  difference  of  766,913  tons  were  hauled  westward 
empty  in  order  to  be  loaded.  Had  the  Company  been  enabled  to  load 
the  empty  cars  with  out-bound  freight  at  the  best  obtainable  rates — 
however  small — the  money  received  would  have  been  net  gain.  Cars 
and  locomotives  deteriorate  as  rapidly  when  idle  as  when  in  use. 

Yet  the  inequality  of  business — in  order  to  move  the  freight  during 
the  busy  season — demands  as  large  equipment  as  though  it  were  con- 
stant. There  might  be  facilities  enough  to  move  large  quantities,  yet 
the  rates  might  not  justify  sending  the  freight.  The  market  price  of 
the  commodity  determines  its  movement.  There  is  a  point  beyond 
which  property  cannot  be  moved  without  consuming  its  value.  This 
was  shown  by  a  calculation  made  in  Ohio  when  there  were  but  few  rail- 

*  Testimony  of  A.  J.  Cassatt,  Trans.  Route  to  Seab.,  Vol.  II,  p.  66. 
t  Speech  of  Hon.  H.  R.  Pierson  in  N.  Y.  Legislature,  Feb,  18, 1873. 


14 

Toads  in  the  State.     It  was  seen  that,  at  the  prices  then  current  in  the 
East,  a  ton  of  corn  at  170  miles,  carried  by  wagon,  became  worthless, 
and  at  330  miles  wheat  was  valueless  ;  while  at  the  same  distances,  car- 
ried by  rail,  the  corn  was  worth  $22  and  the  wheat  $44. 
The  highest  courts  concur  in  recognizing  the 

CONDITIONAL    FAIRNESS    OF    UNEQUAL    RATES. 

Referring  to  such  a  case,  one  authority  says :  "  The  decision  was 
given  upon  a  principle  of  common  sense  founded  upon  the  acknowledged 
fact  that,  if  it  cost  a  railway  company  less  to  carry  the  goods  of  one 
customer  than  those  of  another,  they  w^ere  entitled  to  make  a  reduction 
in  favor  of  the  former."  *  Likewise  another  jurist  says  :  "  The  crite- 
rion for  determining  how  far  a  charge  is  reasonable  or  not,  is,  to  con- 
sider the  trouble,  expense  and  responsibility  attending  the  receipt, 
carriage  and  delivery  of  the  goods  in  question.  Where  these  are  equal, 
the  charge  should  be  the  same  ;  where  they  vary,  the  charge  may  fairly 
be  varied  in  the  same  proportion."  f 

And  in  a  leading  case,  it  was  held  "that  a  company  may  charge 
different  rates  for  transportation  where  the  expenses  thereof  are  differ- 
ent; and,  as  the  expense  of  starting  a  train  is  the  same  for  a  long  or 
short  distance,  this  may  fairly  be  taken  into  account  and  justify  an 
inequality  in  the  rates  of  carriage  between  different  places."! 

In  like  manner,  when  this  question  arose  in  Pennsylvania,  it  w^as 
held  that  "  the  charge  might,  under  different  circumstances,,  vary  in 
amount  without  being,  therefore,  necessarily  unreasonable.  If  reasona- 
ble, it  may,  though  unequal,  be  unobjectionable."§ 

Again,  railway  companies  were  "justified  in  carrying  goods  for  one 
person  at  a  lower  rate  than  for  another  in  consideration  of  a  guarantee 
of  large  quantities  and  full  train  loads  at  regular  periods. "|| 

Also  the  propriety  of  a  company  charging  more  upon  a  branch  line 
than  upon  their  main  line  was  clearly  upheld,  and  it  was  declared  that 
"  to  constitute  undue  preference,  the  unequal  charge  must  be  upon  the 
same  line  or  upon  the  same  portion  of  the  line."Tf ' 

NECESSITY    OF    PRACTICAL    KNOWLEDGE. 

Consequently,  an  intimate  knowledge  of  the  varying  conditions  of 
each  line  is  necessary  in  order  to  prescribe  reasonable   rates.     So 

*  Browne  on  the  Law  of  Carriers,  p.  258.  g  Camblos  v.  P.  &.  K.  Kd,  4  Brewster,  620. 

t  Waif.  Sum.  Law  of  Rys.,  p.  317.  |i  Nicholson  v.  Great  West'n  Ry,4  C.  B.  [N.  S],  3G6. 

+  Ransome  v.  Eastern  Cos.  Ry,  4  C.  B.  [N.  S.],  G3.  «[  Caterham  Ry   Co.,  1  C.  B.  [X.  S.],  410. 


15 

thought  a  Select  Committee  of  Parliament  when  they  reported : 
"  This  is  a  function  which  no  government  ought  to  undertake.  It  in- 
volves the  necessity  of  determining  what  are  the  proper  expenses  of 
the  companies  and  what  economies  they  can  practice.  These  are  mat- 
ters which  require  the  knowledge,  skill  and  experience  of  the  managers 
themselves,  and  any  attempt  on  the  part  of  any  government  depart- 
ment to  do  it  for  them  is  impossible,  unless  the  government  were  to 
undertake  an  amount  of  interference  with  the  internal  concerns  of  the 
company  which  is  neither  desirable  nor  practicable."* 

With  this  intelligent  view  the  Railroad  Commissioners  of  Maine  co- 
incide. In  their  last  report  they  say  :  "In  the  minds  of  those  who 
give  this  subject  the  fairest  consideration  and  possess  knowledge 
enough  of  it  to  appreciate  fully  its  difficulties,  it  becomes  a  conviction, 
more  positive  the  longer  it  is  dwelt  upon,  that  the  only  sure  way  to 
obtain  pernamently  low  rates  on  railroad  traffic — and  especially  on 
freight — is  to  leave  the  problem  untrammeled  by  legislative  enactments 
to  those  whose  special  business  it  is  to  study  out  all  its  intricacies. "f 

For,  as  a  rule,  the  men  who  manage  railroads  are  credited  with 
shrewdness.  That  quality  consists  largely  in  a  keen  appreciation  of 
self-interest — which  consideration  alone  will  impel  them  to  develop 
their  territory.  Whatever  conduces  to  its  wealth  augments  the  com- 
pany's profits.  Left  to  themselves,  they  will  endeavor  to  create  busi- 
ness by  fostering  new  enterprises  and  encouraging  the  development  of 
permanent  industries.  To  this  conclusion  the  English  Parliament  has 
arrived  after  thirty  years  of  patient  investigation. 

TEACHINGS    OF    HISTORY. 

"  History  claims  it  as  her  prerogative  to  offer  instruction."  With 
railways  her  experience  has  been  large.  Every  Statfe  that  has  known 
them  has  sought  to  regulate  them.  The  statute  books  are  replete  with 
futile  enactments.  In  Ohio  nine  distinct  tariffs  of  rates  for  transpor- 
tation have  been  prescribed,  of  which  tlie  State  Commissioner,  in  his 
report  for  1870,  said  they  were  "  the  most  fruitful  s'ource  of  complaint." 

Illinois  early  sought  to  define  what  should  be  charged.  The  first 
attempts  were  either  defeated  or  declared  invalid.  A  subsequent 
measure  devolved  the  task  upon  three  Commissioners,  who  prepared 
one  schedule  for  all  the  roads  in  the  State  alike.  It  has  not  been 
enforced. 


*  Ry.  Cos.  Amalgamation,  p.  xxv.       /  t  R-  R-  Com'rs'  Rep.  [Maine]  1874,  p.  18. 


16 

Iowa  took  the  Illinois  rates,  reduced  them  ten  per  cent.,  and  applied 
them  to  four  trunk  lines. 

Minnesota,  failing  twice  to  establish  fixed  rates,  re-enacted  the  com- 
mon law. 

The  result  has  justified  the  Massachusetts  Commissioners  in  saying : 
"It  would  appear  that  'the  more  such  measures  are  extended  in  their 
operation,  the  more  complex  they  become,  and  the  greater  must  be  the 
difficulties  in  the  way  of  their  successful  operation."* 

To  this  rule  the  Potter  law  is  no  exception.  A  brief  trial  showed 
the  need  of  amendment.  Rates  were  fixed  for  each  twenty-five  miles  ; 
thus,  when  the  haul  exceeded  twenty-five,  fifty  or  seventy-five  miles, 
the  rate  for  the  next  twenty-five  miles  could  be  charged,  even  though 
the  excess  were  but  one  mile.  That  provision  was  amended  by  insert-, 
ing  a  rate  per  mile  for  the  actual  distance  carried.  Its  operation  gives 
some  astounding  results.  Suppose  a  car  load  of  lumber  w^ere  carried, 
say  thirty  miles  east  on,  the  Green  Bay  &  Minnesota  Railroad,  and 
ninety-five  miles  south  on  the  Chicago  &  North-Western. 


Watertowx 


The  gross  rate  would  be  $20 — of  which  the  former  would  receive 
$4.80  and  the  latter  $15.20.  But,  if  this  lumber  were  to  stop  at 
Green  Bay,  the  first  named  road  would  receive  $9 — nearly  double  the 


*  R.  R.  Com'rs'  Rep.  [Mas?.,  1873],  p.  63. 


17 

amount  allowed  it  for  the  same  haul  when  it  takes  the  additional 
trouble  of  handing  it  over  to  another  road  ! 

Suppose,  again,  this  shipment  were  sent  five  miles  on  the  Green  Bay 
Road  and  twenty-five  on  the  North-Western.  The  gross  rate  would  be 
$9 — which,  on  a  pro  rata  basis,  would  give  the  North-Western  $7.50  and 
the  Green  Bay  Road  $1.50  for  handling  the  car  load  and  hauling  it  five 
miles.  Thus  is  ignored  a  principle  which  has  hitherto  been  recognized 
in  every  freight  tariff — an  arbitrary  rate  for  the  first  few  miles  to  com- 
pensate for  the  expense  and  trouble  of  handling.  In  the  charters  of 
British  railways  it  is  covered  by  the  "  short  distance  "  clause,  which 
usually  reads  as  follows  : 

"  For  articles  or  persons  conveyed  on  a  railway  for  a  less  distance 
than  six  miles,  the  company  may  demand  the  same  tolls  as  for  six 
miles,  in  addition  to  a  reasonable  charge  for  the  expense  of  stopping, 
loading  and  unloading." 

Untaught  by  the  failures  recorded,  Wisconsin  likewise  disregarded  the 

CAUTIOUS  ACTION  OF  OTHER  STATES. 

In  Massachusetts,  where  the  railways  are  owned  by  the  people  who 
make  the  laws,  the  Commonwealth  can  assume  control  of  a  road  only 
after  it  has  been  in  operation  twenty  years,  "  by  paying  therefor  the 
amount  of  capital  paid  in,  with  a  net  profit  thereon  of  ten  per  cent, 
from  the  time  of  its  payment  by  the  stockholders  to  the  time  of  the 
purchase. 

And  in  England,  as  early  as  1844,  Parliament  enacted  that  if,  after 
twenty-one  years,  any  new  railway  had  made  ten  per  cent,  for  three 
years.  Government  might  reduce  the  rates  charged,  but  should  at  the 
same  time  guarantee  the  company  ten  per  cent,  net  for  the  next  twen- 
ty-one years.  Such  is  the  law  of  England,  to-day.  Ten  per  cent, 
guaranteed  where  money  is  plenty  at  three  per  cent.,  while  in  Wis- 
consin, looking  to  foreign  capital  for  its  development,  the  most  beggarly 
return  is  denied  I 

Railway  investments  are  precarious.  Unlike  personal  property  or 
real  estate,  they  are  not  disposable  at  Avill ;  therefore,  should  they 
have  ample  security.  So  thought  the  New  York  Legislature  when 
they  adopted  the  English  rule  in  their  general  railroad  law,  the  thirty- 
third  section  of  which  reads : 

"  The  Legislature  may,  when  any  such  railroad  shall  be  opened  for 
use,  from  time  to  time  alter  or  reduce  the  rate  of  freight,  fare  or  other 


18 

profits  upon  such  road ;  but  the  same  shall  not,  without  the  consent  of 
the  corporation,  be  so  reduced  as  to  produce  with  said  profits  less  than 
ten  per  cent,  per  annum  on  the  capital  actually  expended  ;  nor  unless, 
on  an  examination  of  the  amounts  received  and  expended,  to  be  made 
by  the  State  Engineer  and  Surveyor  and  the  Comptroller,  they  shall 
ascertain  that  the  net  income  derived  by  the  company  from  all  sources 
for  the  year  then  last  past  shall  have  exceeded  an  annual  income  of 
ten  per  cent,  upon  the  capital  of  the  corporation  actually  expended." 

In  Pennsylvania,  legislation  has  taken  the  form  of  prescribing 
maximum  rates ;  yet  the  companies  most  restricted  are  allowed  to 
charge  an  average  of  four  cents  per  ton  per  mile.  That  rate  of  toll  is 
named  in  the  charter  of  the  Philadelphia  and  Reading  Railroad,  which 
road  averages  a  daily  freight  tonnage  of  thirty-five  thousand  tons, 
making  a  train  sixteen  miles  in  length.  "  And  such  a  train,"  says  the 
President,  "is  coming  down  the  road  every  day." 

The  railroads  of  New  Jersey,  by  general  law,  are  authorized  to 
charge  ten  cents  per  ton  per  mile. 

In  Ohio,  the  railroads  are  unlimited  up  to  thirty  miles,  beyond 
which  they  are  authorized  to  charge  five  cents  per  ton  per  mile. 

The  six  leading  railroads  of  England  are  empowered  to  charge  six 
cents  per  ton  per  mile.  So  careful  has  been  the  action  in  this  regard 
that  a  Parliamentary  committee  said  of  these  rates:  "  They  are  always 
fixed  so  high  that  it  is  or  becomes,  sooner  or  later,  the  interest  of  the 
companies  to  carry  at  lower  rates."* 

PROSPEROUS  ROADS  A  PUBLIC  BENEFIT. 

Railway  owners  are  not  alone  concerned  in  the  maintenance  of  their 
property.  Profitless  roads  cannot  meet  the  wants  of  their  patrons. 
Considerable  margin  above  expenses  is  required  to  keep  a  road  in  safe 
running  order.  To  a  Parliamentary  committee  this  was  evident ; 
therefore  they  say  :  "  Where  a  company  pays  little  or  no  dividend  on 
its  original  capital,  the  working  expenses  are  often  cut  down  injuri- 
ously. Danger  arises  from  insufficient  service,  and  the  risk  of  present 
loss  attending  any  reduction  of  fares,  even  with  the  fairest  expectation 
of  future  profit,  is  a  bar  to  liberality  of  management.  For  the  public 
advantage  it  is  desirable  that  a  railway  should  yield  reasonable  returns 
to  those  under  whose  control  it  is  placed. "f 


*  Ry.  Cos.  Amalgamation,  p.  xxxiv.  f  Royal  Commission  on  R'ys,  p.  xxiii. 


19 

By  wear  and  tear  a  railway  will  depreciate  ten  per  cent,  yearly. 
To  that  extent  companies  that  are  able  make  renewals.* 

To  omit  making  these  renewals  would  be  held  to  be  criminal  negli- 
gence. Yet  to  make  them  will  require  large  outlays.  These  are 
chargeable  to  the  business  of  the  road.  They  are  part  of  the  current 
expenses,  and  should  be  defrayed  out  of  the  gross  earnings.  But  the- 
Potter  law  rates  preclude  this.  Thus,  Wisconsin  law  operates  to  im- 
poverish the  roads,  render  them  unsafe,  then  punish  the  companies  for 
becoming  so  ! 

CAPITALISTS   ALARMED. 

Neither  has  the  State  benefited  by  the  law.  Wherever  capitalists^ 
meet,  its  baleful  effects  are  known  and  appreciated.  They  deem  its- 
passage  an  act  of  dishonesty.  Their  impressions  are  conveyed  to  the 
State  Department  through  its  agents  abroad.  Writing  from  Rotter- 
dam, the  Consul  says : 

'•  The  laws  recently  enacted  in  Wisconsin  concerning  railroads  have 
just  affected  those  securities  in  which  the  Dutch  capitalists  had  invested 
enormous  sums,  namely,  the  Chicago  &  North- Western  and  the  Mil- 
waukee &  St.  Paul  railroads.  As  yet,  the  holders  of  these  bonds 
still  believe  that  the  hopes  created  and  entertained  by  the  directors  of 
these  railroads  will  be  realized,  and  that  those  laws  will  be  annulled  by 
the  Supreme  Court.  Should  this  not  be  the  case,  a  new  depreciation 
of  these  securities,  as  well  as  of  all  other  American  railroad  bonds  may 
be  expected.  For  years  to  come  no  investment  of  Dutch  capital  in 
United  States  railroad  enterprises  will  be  made.  Financiers  who,  in 
this  country,  have  been  dealing  in  United  States  railroad  securities, 
agree  in  declaring  that  a  revival  of  confidence  in  American  railroad 
enterprises  can  only  be  e-xpected  when  a  radical  change  of  the  present 
legislation  on  railroad  companies  takes  place  in  the  different  States,  "f 

Were  Wisconsin  beyond  the  need  of  foreign  credit,  she  might  possi- 
bly afford  to  repel  it.  But  with  the  northern  part  of  the  State  unbro- 
ken, and  her  vast  resources  lying  dormant,  it  would  seem  unwise  to  bar 
out  the  means  necessary  to  develop  them.  Capital  can  no  longer  be 
drawn  hither  by  specious  statements.  The  promise  of  fair  returns  will 
avail  nothing  unless  there  is  positive  assurance  that  the  public  guaran- 
tees will  be  honored.  "  The  Germans  believe  that  they  have  been 
deceived  and  defrauded,"  writes   the  Consul  at   Frankfort  to   Secre- 


*  Transportation  Routes  to  Seab.,  Vol.  II,  p.  50.  f  <^ommercial  Relations  [1874],  p.  902. 


20 

tary  Fish.  "  They  also  find  that  sovereign  States  deny  and  disre- 
gard their  guarantees ;  that,  from  the  distance,  they  seem  indifferent 
to  them,  and  almost  seem  disposed  to  forget  their  liabilities,  or  to 
wholly  avoid  their  payment."  And  he  adds  :  "  The  capital  of  Europe 
has  been  turned  toward  the  United  States  on  account  of  the  prospects 
and  hope  of  higher  interest.  Now  the  interest  offered  by  European 
enterprises  is  equal  to  the  usual  rates  of  interest  in  the  United  States. 
Hereafter  this  capital  will  find  abundant  use  in  its  own  country."* 

Still  later,  the  same  Consul  says  :  "  Extreme  caution  has  been  the 
rule  of  action  ;"  and  after  remarking  that  "  Frankfort  continues  to  be 
the  central  banking  city  of  Europe,"  he  adds :  "I  regret,  however, 
that  American  securities,  other  than  those  of  the  United  States  Gov- 
ernment, are  still  regarded  with  suspicion. "f 

In  the  light  of  these  facts,  and  the  growing  needs  of  the  State, 

WHAT    SHOULD   WISCONSIN    DO? 

The  Potter  law  has  retarded  her  progress.  It  has  injured  the 
State  in  the  esteem  of  the  world.  Capital  avoids  her.  Without  credit 
she  cannot  advance.  Minnesota  quickly  retracted  her  restrictive  law. 
Wisconsin  should  do  likewise.  Thus  would  confidence  be  restored  and 
a  simple  act  of  justice  be  done.  For  transportation  is  a  commodity, 
and  is  sold  as  are  other  services.  If  its  price  can  be  fixed  by  law,  so 
can  that  of  other  commodities  furnished  by  associated  capital.  If 
rates  for  railway  service  are  to  be  arbitrarily  fixed,  why  not  extend 
the  control  to  other  associations,  and  prescribe  the  price  of  board  at 
hotels,  the  rate  at  which  newspapers  shall  advertise  and  insurance  com- 
panies take  risks  ?  In  New  England,  less  than  a  century  ago,  the  price 
of  labor  and  the  products  of  labor  were  limited  by  law.  "  Such  good 
orders,"  says  Hubbard,  "expired  with  the  first  golden  age  in  this 
w^rld."  Civilization  is  thought  to  have  made  some  progress,  and  leg- 
islators are  believed  to  be  wise  as  they  are  strong,  and  just  to  all. 

The  rates  of  fare  and  freight  enforced  by  law  in  Wisconsin  are  inde- 
fensible. They  are  proven  to  be  unreasonable.  The  railways  are 
compelled  to  furnish  transportation  below  cost.  In  view  of  which, 
Edmund  Burke's  utterance  is  pertinent  and  true  to-day  :  "  Men  have 
no  right  to  what  is  not  reasonable." 

J.  W.  MIDGLEY. 


*  Commercial  Relations  [1873],  p.  379. 
t  Commercial  Relations  [1874J,  p.  440. 


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